The United States government’s lawsuit against Standard
& Poor’s proves that there is still life in the effort to hold financial
institutions responsible for the financial crisis, for at least a little while
longer. According to Dealbook three aspects of the suit are particularly interesting.
The first relates to the government’s insistence on an
admission of guilt from S.&P. Such admissions are costly to extract, and
often viewed as unnecessary – ordinary people do not admit guilt when they get
divorced, or pay up after auto accidents, after all, even where the fault is
clear.
Perhaps for this reason, the Securities and Exchange
Commission has not required such admissions in the past, much to the
consternation of some observers, and at least one judge. Jed S. Rakoff of
Federal District Court in Manhattan reacted with horror to the S.E.C.’s
nonadmission settlements with Citigroup and Merrill Lynch over wrongdoing
related to the financial crisis.
The S.&P. suit shows that at least part of the
government has come around to Judge Rakoff’s way of thinking. If so, we should
expect to see fewer settlements and more court cases in the future….
More? Check out the
coverage in http://dealbook.nytimes.com/2013/02/11/s-p-lawsuit-draws-new-line-in-the-sand/
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